Should a landlord pay commission to the letting agent if the tenant refuses to move out?

Do I have a case for not paying commission to Foxtons and possibly repayment of commission paid in the past based on the following facts:

I have been letting out my property since 2008. I have had the same tenant and same letting agent during the whole of this period. However, I now need to sell.

I explained this to the tenant and they understood. The letting agent issued a Section 21 four months before the end of the tenant’s lease, which is today (4 July 2014). So everything is above board.

However, 3 days ago the letting agent called to say that the tenant has been unable to find anything else and has said he is not leaving. I have tried to contact the tenant but I am getting no response. To add salt to the wound the letting agent is now saying that since the tenant has not left then commission is due (£1300).

I do not believe it is as the tenant is staying without my permission and I have no idea if he intends to pay any further rent anyway. I have emailed the tenant to say that the tenancy has now ended. I have explained to the agent I am not renewing.

The agent (Foxtons) keeps pointing to the terms and conditions which states “renewal commission will become due in respect of renewals, extensions and hold-overs of new agreements etc. etc.”

As I am not renewing either through Foxtons or privately I am not entering into any renewal.

I also think I am on an old contract and having dug around on the internet I’m not sure why I’ve been paying renewal commission for the last 6 years as there seems to have been a court case limiting it to 2 (I may have misunderstood), but particularly as the last contract my tenant had was fixed for 3 years.

Answer:

So far as your tenant is concerned, it sounds to me as if you are going to have to evict him as he has the right to stay there indefinitely if you do not. You will find some options here.

However so far as the agents fee is concerned, it will depend partly on the terms of the contract and partly on whether you are a ‘professional’ landlord or not.

Let me explain.

The OFT v. Foxtons case

The case you have no doubt seen on the internet (and which was reported on this blog here) was brought by the Office of Fair Trading against Foxtons in 2010.

It was based on the Unfair Terms in Consumer Contracts Regulations (the OFT are the regulator) and therefore the case will only apply to you if you are a ‘consumer’ – ie not a professional landlord.

It was also brought in respect of a ‘find only’ contract where the agent was not actually managing the property.

Foxtons argued that in this situation they were entitled to ‘renewal commission’ even though they had not actually done any work for the landlord, because the fact that the landlord had a tenant in his property at all with no ‘voids’ was down to their skill and service in finding a good tenant.

The Judge however disagreed and said that in the context of the clause and the contracts referred to in the case, the clause was not valid because it was unreasonably long and (in particular) because it was buried in the ‘small print’ and not brought to the landlords attention before he signed (there was a lot more but that is the nub of it).

Foxtons were going to appeal but then reached agreement with the OFT that they (ie the OFT) would not object to a clause where renewal commission was payable for two years at a lower rate of interest.

Your case

If your contract is the same as the one looked at in the OFT v. Foxtons case therefore AND if you are not a professional landlord, then your clause will almost certainly be invalid.

What I would suggest you do is write to Foxtons saying that you have been advised that the clause in your agency agreement is invalid under the case of the Office of Fair Trading v. Foxtons (ie themselves) in 2010 and that unless they drop their claim you will be consulting solicitors about reclaiming earlier commission paid to them.

If you want to get some more specific advice in the context of your agreement, I suggest you use our fixed fee telephone advice service and I will get one of the solicitors at Anthony Gold to speak to you.

2 Responses to Should a landlord pay commission to the letting agent if the tenant refuses to move out?

It’s not clear if the agent is managing the tenancy. If they are and they continue to do so beyond the tenancy end date then they should get remunerated for doing so.

If they’re not managing the tenancy it seems pretty ruthless and sharp practice to bill the landlord for another year under such circumstances.

Even if they are managing it, slapping the landlord with a bill for an entire year’s fees seems pretty unreasonable. The agent should be more flexible and perhaps agree to manage it based on a daily rate, payable monthly until such time as the landlord’s solicitors take over or the landlord regains possession.

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